'This Week' Transcript: Tax Deal

AMANPOUR (voice-over): Welcome to viewers here and around the
world. I'm Christiane Amanpour. And at the top of the news this week,
deal...

OBAMA: My job is to do whatever I can to get this economy moving.

AMANPOUR: ... or no deal?

SANDERS: Do we really need to give tax breaks to the rich?

(UNKNOWN): Our caucus will not submit to hostage-taking. We will
not submit to this deal.

AMANPOUR: Democrats rebel against the president's tax cut plan, and
he calls in reinforcements.

B. CLINTON: If I were in office now, I would have done what the
president has done.

AMANPOUR: Can Obama get Democrats on side? Our headliner this
morning, the president's top political adviser, David Axelrod.

Then, roadblock to peace.

H. CLINTON: I regret that we have not gotten farther faster.

AMANPOUR: As talks falter, the Palestinian prime minister, Salam
Fayyad, and Israeli opposition leader Tzipi Livni in a rare joint
television interview only on "This Week." Can they map out a path to
peace?

Plus, in the line of fire, royals caught up in riots over drastic
spending cut.

And analysis of all the week's politics on our roundtable, with
George Will, Nobel Prize-winning economist Paul Krugman, political
strategist Matthew Dowd, and ABC's Cokie Roberts. Plus, the Sunday
funnies.

LENO: The worst drivers in the country in Washington, D.C. Well,
yeah, Republicans can only turn right, Democrats can only turn left, and
Obama weaving all over the place.

(END VIDEO CLIP)

ANNOUNCER: From all across our world to the heart of our nation's
capital, ABC "This Week" with Christiane Amanpour starts now.

AMANPOUR: Hello again. The Senate is expected to begin voting on
the president's $860 billion tax cut plan on Monday. In the House,
Democrats say not so fast. They want to make significant changes to the
bill.

The president is pressuring those in his own party to vote for the
deal. And on Friday, he even brought former President Clinton into the
briefing room to sell the plan.

Joining me now, White House senior adviser David Axelrod.

Thank you for joining me.

AXELROD: Good to be here.

AMANPOUR: You heard, as we started, that some of your congressional
Democrats are saying they're not going to be held hostage to this and
that they will not submit to it. Will they?

AXELROD: Well, look, I don't put it in those terms. I think every
single person in that building does not want taxes to go up on January
1st, does not want to see 2 million people lose their unemployment
insurance. Everybody understands what the implications for the economy
would be -- every economist has spoken to it -- if that package doesn't
move forward. So I believe that there will be a coming together around
it.

AMANPOUR: Where is the room to negotiate? What can you offer them?

AXELROD: I'm not -- first of all, I'm not here to negotiate. And,
secondly, we have a framework, we have an agreement, and I don't
anticipate that it's going to change greatly.

There have been some changes that folks in the House were concerned
about, the absence of an extension of an energy -- renewable energy tax
credit. That is now included in the package. But in the main, I don't
see major changes.

AMANPOUR: So not on the -- the estate tax?

AXELROD: Look, Christiane, the nature of compromise is that you
have to accept things that you don't like in order to get things that
are very important. There are -- this is a good package for the middle
class. This is a good package for the economy. In addition to
extending middle-class tax cuts that were there, we're going to have a
payroll tax cut, we're going to have business tax cuts that are going to
spur hiring and growth in 2011.

AMANPOUR: But you also...

AXELROD: So this is an important step forward, and it would be
terribly difficult if -- if it didn't.

AMANPOUR: All right. But you're also having to sell something that
the president said he would never do during the campaign, tax breaks for
the very wealthy, and you've seen...

AXELROD: Well, let me just correct you for a second. What the
president said -- what the Republican plan was, was a permanent tax cut
for the wealthy, and the president would not have accepted a permanent
tax cut for the wealthy. That would have had budget implications into
the future that we could not tolerate. It wouldn't have been right; it
wouldn't have been fair. It would have been $700 billion that we
couldn't afford, that we would have to borrow from China and other
countries. He refused to do that.

This is a temporary tax cut. And this was part of a compromise that
-- that includes tremendous help for families with children, for people
who want to send their kids to college, the Earned Income Tax Credit,
the payroll tax. This is going to mean thousands of dollars in pockets
of the average American.

AMANPOUR: You say it's not going to be a permanent tax cut, but
look into your crystal ball, because certainly there are economists who
believe this is the first step to making it permanent. It's a two-year
deal. That's going to be right in the middle of when you are going to
go back and trying to get this president re-elected. Are you going to
have this fight again?

AXELROD: Well, you say there are economists who say that. This is
fundamentally a political issue. And in 2012, we're going to have a big
debate about -- about this issue.

We do not believe that we can extend these tax cuts for the wealthy
permanently, and we're going to fight very hard, and we're going to let
the American people, who agree with us on this issue, have a say.

But at the same time, right now, we face a situation where
everyone's taxes would go up on January 1st. I think we're going to be
in a fundamentally different position in 2012. The economy will be
stronger. We'll have gone through a big debate on -- on how we have to
-- what we have to cut and give up. I don't think people are going to
make that tradeoff in 2012.

AMANPOUR: Do you think that the Democrats in the House should have
been brought in on these negotiations? They say they feel, presumably,
they have been completely blindsided.

AXELROD: Well, look, these came together -- these discussions came
together very quickly. They were prompted by the looming deadline. We
felt a sense of urgency.

We brought them in when there was -- to begin that process. It just
accelerated very quickly, and we felt that we had to seize the moment,
because if we didn't, the American people would pay the price, the
economy would pay the price.

AMANPOUR: Do you think it's -- I want to know what the strategy
is. You heard -- you saw the -- the funny we had up there, Jay Leno
saying the left is going -- the liberals are going left, the
conservatives are going right, and everybody else is going through the
middle. Is this a strategy? Is the president ditching the liberal
base? Is he trying to be pragmatic? What is happening here?

AXELROD: First of all, I think we should be less focused on the
political equations here and more on the economic equations.

AMANPOUR: Well, I just want to ask you about the pragmatism here.

AXELROD: And that's what we're doing -- but this is -- this is
important, because the president's focus was one, which is, what do we
do to keep this economy moving forward? What do we do to make sure that
middle-class people in this country do not see their taxes go up?

And what we got here was a package that prevented their taxes from
going up and added additional tax cuts that are going to make a
difference for them and the economy. And that is -- and that's a win
for the American people.

AMANPOUR: OK, but clearly he hasn't been able to convince them,
because they're still, as they say, mad as hell, and he had to bring in
President -- former President Bill Clinton into the White House..

AXELROD: When you say "them," you're talking about members of
Congress?

AMANPOUR: Yes.

AXELROD: Because the one public poll I saw showed very, very strong
support for this compromise.

AMANPOUR: But still...

AXELROD: The American people count, too.

AXELROD: Of course, they do, but he had to bring into the briefing
room, presumably to speak to the American people, the former president,
Bill Clinton. And let's just put out what he said at the briefing room
just this weekend.

(BEGIN VIDEO CLIP)

B. CLINTON: The agreement taken as a whole is, I believe, the best
bipartisan agreement we can reach to help the largest number of
Americans and to maximize the chances that the economic recovery will
accelerate and create more jobs and to minimize the chances that it will
slip back.

(END VIDEO CLIP)

AMANPOUR: So that's pretty succinct. I mean, don't really like it,
but this is the reason to have to do it. Do you think the president --
he's got many tools at his disposal. He's commander-in-chief. He's all
sorts of things, including he owns the bully pulpit. Do you think he's
using it in the way that he needs to, to sell these programs?

AXELROD: Oh, I think that he's been very -- he's been out there
every day this week doing that, and I think that's one of the reasons
why there's strong public support for it. So, yes, I think he has.

AMANPOUR: Let me talk about the stakes. Your outgoing top economic
adviser, Larry Summers, he caused quite a stir this week, and said if
this deal didn't pass, then the United States is headed for a double-dip
recession.

AXELROD: Well, that's not quite what he said. I was there when he
spoke. He said it would raise the possibility -- materially raise the
possibility of a...

AMANPOUR: A double-dip.

AXELROD: ... a double-dip recession.

AMANPOUR: OK, well, he -- he raised that word...

AXELROD: But he didn't say we were headed for it.

AMANPOUR: All right. Well, he raised that word again.

AXELROD: But -- but there's -- but there's no doubt that what --
that it would be deleterious to the economy. Every economist has said
-- look, almost every economist has raised their estimation of what our
growth will be in 2011 based on this package.

AMANPOUR: So what will this package do?

AXELROD: Well, what it'll do is, in addition to putting money in
the pockets of middle-class people that -- that they will spend and
accelerate our economy, it includes some business tax cuts like one that
will allow corporations and -- and small businesses to buy equipment in
the next year and to further taxes on it. And that will spur investment
and get some of -- there's $1.8 trillion sitting on the books of -- of
corporations across this country. We want to get them in the game.
This will help get them in the game.

AMANPOUR: And on the key issue of employment, unemployment, you've
said that it's going to create millions of jobs.

AXELROD: Well, I haven't said it, but outside consultants, Mark
Zandi, others, have said that, and there's -- there's no doubt that when
you create economic growth, you also create hiring, and that -- that's
our goal.

AMANPOUR: OK. And what about the big issue that appears to be on
everybody's mind -- certainly the midterm elections spoke to it -- and
that is the deficit and the debt? This is going to add another trillion
dollars. So how do people take the administration seriously when they
talk about trying to reduce the debt?

AXELROD: Christiane, first of all, understand that much of this was
baked into people's computations because it's an extension of tax cuts
that were already on the books. There were about $350 billion in new
tax cuts, but they're all temporary.

AMANPOUR: But it adds more.

AXELROD: They're all temporary. And the biggest thing we can do to
help right ourselves is to get robust economic growth. Without that,
our -- our -- our deficit situation is going to be materially worse. So
in the long term, these are not going to have impacts on our deficits.
For the next few years, it will.

AMANPOUR: And the U.S. can live with that?

AXELROD: Well, I think that what the U.S. can't live without is
robust economic growth, and that's what we're after. We want to see
growth. We want to see hiring. We want to see people back to work.

AMANPOUR: Do you think you'll get the majority of Democrats on side?

AXELROD: I think we're going to get strong support on both sides of
the aisle. I respect people who are unhappy. We share their view on
the upper-income tax cuts, on the estate tax. That was a part of the
deal, odious though it may be, in order to accept in order to get all
the good things that come along with -- that's the nature of compromise.

So I'm sure there will be some who will have a hard time getting
over that hump. Others will -- will see that this is extraordinarily
important for our economy and for people across this country that we not
let this get to a Washington-style standoff.

AMANPOUR: We'll be watching.

AXELROD: Thank you.

AMANPOUR: Thank you very much, indeed, David Axelrod.

AMANPOUR: And now to one of the Administration's top foreign policy
priorities: Middle East peace. But after two years of haggling,
haranguing, and hoping, the Obama administration has little to show for
its effort.

This week, direct peace talks between Israeli and Palestinian
negotiators collapsed, and the United States has given up trying to get
Israel to freeze settlements as a condition for talks, a disappointing
turn of events for President Obama, who from the first days of his
administration was determined to get both sides directly talking to each
other.

(BEGIN VIDEO CLIP)

OBAMA: America must play its role in ushering in a new era of
peace. To the Muslim world, we seek a new way forward.

MILLER: He came in as a potentially transformative president,
louder, harder and faster on this issue than any of his predecessors.

AMANPOUR (voice-over): And on his second day in office, President
Obama appointed a special envoy to the region, George Mitchell.

MILLER: He, in effect, had no strategy. It was an effort to repair
American credibility with one audience, the Arabs and the Muslims, but
it -- it seemed to pay very little attention to the political realities
in Israel.

AMANPOUR: Talks between the Israelis and the Palestinians had
stalled for two years. And to move them along, President Obama insisted
that Israel stop building Jewish settlements where the Palestinians
planned to build their state.

H. CLINTON: He wants to see a stop to settlements, not some
settlements, not outposts, not natural growth exceptions.

AMANPOUR: Israeli Prime Minister Benjamin Netanyahu eventually
agreed to a 10-month freeze on new construction. And at the end of
August, the White House announced the resumption of long-stalled
face-to-face negotiations between the Israelis and the Palestinians.

OBAMA: This moment of opportunity may not soon come again. They
cannot afford to let it slip away.

AMANPOUR: But it did. At the end of September, the settlement
freeze ended and the U.S. could not persuade Israel to extend it.
Direct talks broke down, and now the process is back to where it started.

H. CLINTON: It is no secret that the parties have a long way to go
and that they have not yet made the difficult decisions that peace
requires.

(END VIDEO CLIP)

AMANPOUR: We're going to explore now what those difficult decisions
are. It's a rare opportunity -- exceedingly rare -- to have top
Palestinian and Israeli officials together here for an interview.

So joining me now, Palestinian Prime Minister Salam Fayyad and
Israeli opposition leader, former Foreign Minister Tzipi Livni. They
are in Washington to address the 2010 Saban Forum hosted by the
Brookings Institution.

Welcome to both of you. Thank you for being here.

LIVNI: Thank you.

FAYYAD: Thank you.

AMANPOUR: Let me ask you first, Ms. Livni, as a representative of
Israel, how can Israel do this, basically humiliate the United States,
its biggest backer, its biggest donor of all sorts of aid, and just say
no to a request for another 90-day freeze, in order to get this peace
process moving?

LIVNI: I believe that it was the wrong answer. I believe that the
relations between Israel and the United States are existential to the
future of the state of Israel. But more than that, I believe that peace
treaty between Israel and the Palestinians is an Israeli interest; it's
not a favor to President Obama.

And Israel need to make these kind of decisions in order to live in
peace, so, basically, peace treaty between Israel and the Palestinians
is an American interest, but it is also an Israeli interest.

AMANPOUR: So if you don't agree with basically rejecting the United
States' request for this freeze -- let me ask you, Prime Minister -- how
can your side now, after all that the United States has put in, after
all the goodwill the United States has given, particularly to you and
your efforts in your -- in your institution-building -- how can you now
say, no, sorry, no freeze, no temporary freeze, we're not going to have
direct talks?

FAYYAD: It's a question of credibility, credibility of the
political process achieved (inaudible) is supposed to be an end to the
Israeli occupation that began in 1967. So when you experience the kind
of difficulties that this particular process has experienced, in -- in
-- in the form of failure to get Israel to comply with something as
basic as to stop committing further violations to international law in
the form of continued settlement expansion, the question, how can one
rely on this process to deliver on the end of occupation? It's a
question of political credibility.

AMANPOUR: OK. But -- but the point is, actually -- I know that
there was a great deal of discomfort within the Palestinian leadership
when the administration insisted on this settlement freeze for talks.
It sort of President Abbas in a bit of a strange position. Could he not
decide to go ahead, since there are all these things on offer on the
core, core issues now?

FAYYAD: We definitely would like to know what is on offer on core
issues, and that -- that really is what this process should be about and
what we would really would like to know as early as possible is what it
is that Mr. Netanyahu has in mind when he says the Palestinian state.

AMANPOUR: Well, let me ask you, then. You heard the speech on
Friday night here in Washington. Secretary Clinton laid out the core
issues. And of the big ones on Jerusalem, she talked about, you know,
how each side has to really be able to negotiate on what their
aspirations are for Jerusalem and also to keep it a place for all the
world's faiths and populations. Your own defense minister, Ehud Barak,
went even further, talking about splitting Jerusalem. Is that something
that--

LIVNI: And then the prime minister said today that what Ehud Barak
said a few days ago is not a government policy. But I think that the
good news is that what Secretary Clinton said, that they are going to
discuss with Israel and the Palestinians their basic position on the
core issues.

And these are the difficult decisions that need to be taken, in
terms of Israel's security for the future, border, Jerusalem is just one
of the core issues that are on the table. So -- so basically the choice
in the Middle East is sometimes between bad options. So in choosing
between building more buildings or making peace, I prefer to make
peace. But it is also a matter of trust, and the parties need to regain
the trust.

AMANPOUR: And -- and on the issue of refugees -- this has been a
big issue, obviously, for the Palestinians. On the refugees, Mrs.
Clinton said, again, that it's a difficult and an emotional issue, it
requires a just and permanent solution.

Is it time for the Palestinians to recognize what basically
everybody knows, and that is that not all the '48 refugees are going to
come back, and that there must be a just compensation and a just
solution to all of this? Can the Palestinians do this?

FAYYAD: The formation used by the secretary in her address at the
Saban Forum two days ago actually was appropriate. She talked about
trust and fair resolution.

This is one of the permanent-status issues to be actually discussed
and agreed that, along with borders, Jerusalem, settlements, and the
rest of the issues. And -- and so we're looking forward, actually, to a
process that could begin immediately.

We already have indicated to the Americans where we stand on the
basic issues. I think what really has to be done now is, in order to
give the process the kind of credibility that's required, is for us to
really know with precision where it is that the government in Israel
stands on the fundamental issue of what it is that's meant by an end to
Israeli occupation, what is it that's meant by a state of Palestine.

We're most troubled by what we hear, by pronouncements made
especially by the prime minister of Israel, when really the focus is on
ending the occupation. Him continuing to use such loose language like
we do not wish to continue to have control over the lives of
Palestinians, it's time for more precision, specificity.

LIVNI: Can I say something about refugees, if I may? Because the
concept of two states for two peoples means that Israel is homeland for
the Jewish people and, as Israel gave refuge to the Jews who needed to
leave Europe and Arab states after -- or before and after the creation
of the state, so does the Palestinian state. So, by definition, the
creation of the Palestinian state is the answer to this sensitive --
sensitive problem of -- of the Palestinians. But this is -- but this is
the deal basically.

AMANPOUR: In this regard, Secretary of State Clinton also said that
the United States will be offering bridging proposals. That's one step
before offering a plan. Do you look forward to the United States
offering bridging proposals on these core issues?

LIVNI: I -- I believe that the best thing for Israel is to
negotiate, to make the decisions, and to make the deal itself.

AMANPOUR: Right, but since that hasn't happened in the last decade...

LIVNI: I -- I negotiated with the Palestinians for nine months. I
think it's possible. And this -- what need to be -- this is the role of
the Israeli leadership, so I hope -- I hope, hope -- hopefully, the
Israeli government would make the decisions in order...

(CROSSTALK)

AMANPOUR: And if they don't, would you be comfortable with U.S.
bridging proposals?

LIVNI: It depends -- it depends on the -- on the substance. You
know, it's not a -- need -- need to see what are these bringing
proposal, whether these represent the interests of Israel, and I believe
also not everything is a zero-sum game. Not everything which is
pro-Israel is anti-Palestinian and vice versa.

AMANPOUR: Well, I mean, the United States is...

LIVNI: So there are some proposals -- there are some proposals can
represent the interest of Israel, and there are some that maybe are
going to be problematic, but it needs to be judged in the future.

AMANPOUR: Well, the United States is committed, and she, again,
reiterated...

LIVNI: And that's led to here. I think that it's good news.

AMANPOUR: ... committed to the security of Israel and -- and -- and
peace and is saying that these issues do need to be dealt with. And
since they're not being dealt with...

LIVNI: This is good news.

AMANPOUR: ... would your side -- would your side agree and see as a
possible thing U.S. bridging proposals?

FAYYAD: Taken all together, I think it was clear that the secretary
on the core issues had something to say, and we welcome that, as a
matter of fact. I looked at her statement as a solid (ph) statement,
deliberate, on each of the permanent status issues.

She had a middle (ph) definition going forward, and she did say that
the United States would come up with bridging proposals as appropriate
when necessary. It may be necessary. It may be unavoidable, actually,
for the United States acting as a broker at some point to come in with
bridging proposals so we make this happen.

AMANPOUR: Ms. Livni...

(CROSSTALK)

LIVNI: The good news is that the determination of the United States
not giving (inaudible) process and the future treaty. Bridging
proposals need to be seen in the future.

AMANPOUR: That's good news that the United States says it's going
to stay committed.

LIVNI: Yes. Yes.

AMANPOUR: But, you know, many people who are big friends of Israel
are really lamenting the fact that the United States has been given a --
sort of a bloody nose in -- by the Israeli government regarding these --
this settlement and the idea of pursuing these face-to-face talks.

So you -- you are sitting here with Salam Fayyad. The Israeli
government, the Europeans, the United States, many governments around
the world are astounded and impressed by what Mr. Fayyad has done in
terms of institutional building, economic growth in the West Bank, and
security development. Apparently, it's -- it's one of the best times...

LIVNI: Yes.

AMANPOUR: ... in terms of security by the Palestinians certainly on
the West Bank.

LIVNI: Yes, it is.

AMANPOUR: Why is Israel not able to give more to partners such as
Mr. Fayyad to boost his credibility, to boost his ability to bring the
population along, and that of the Palestinian leadership?

LIVNI: Basically, I would like to show what you said about the
important thing that Salam -- that Prime Minister Fayyad is doing, what
we call changing the realities on the ground. Israel is helping, is
working with Salam Fayyad in order to do the best.

And this is just one part of for the future, because what he's doing
is something that Israel cooperates and helps to do, but it's not
enough. The idea is to have something complementary, and this is the
peace treaty, the legal peace treaty between Israel and the
Palestinians, so we are helping, we're working with, I think that you
can say so (ph) Israel.

AMANPOUR: Are you getting enough help?

FAYYAD: No, not enough, relatively...

(CROSSTALK)

LIVNI: Help, but not enough.

FAYYAD: Not enough. Not enough. Not nearly enough relative to the
objective of having to see the occupation come to an end in the course
of 2011. I mean, that's what we were looking at. Consistent with that,
one would think the...

AMANPOUR: Do you think that's even possible now?

FAYYAD: I think it is eminently possible. I think the expectations
should be set right, and they should set high. Unless that begins to
happen, then, you know, this -- then we'll be allowed (ph) to continue
to drift along.

But what I have just said is that this is not nearly enough relative
to the objective of -- of having to see the occupation come to the end
in the course of this coming year. I think it's eminently possible.
There is no reason why we should not by now have begun to see evidence
of the occupation beginning to be rolled back. We haven't yet seen such
signs.

It's very important for this -- our effort, the one that we just
referred to, to begin to be seen as state in the making. I think it's
hugely important not only for us Palestinians, but also for Israelis as
well.

AMANPOUR: And do you -- you know, a lot of Palestinians have said,
well -- leadership has said, well, we're just going to declare our own
unilateral state. Are you committed to that? Do you think that's useful?

FAYYAD: What we are committed to is statehood, not declaration of
statehood. We're looking for a state. We did make a declaration of
statehood going back to 1988. This time around, we're looking for real
state on the ground.

AMANPOUR: And, Ms. Livni, during the elections, you did win more
votes.

LIVNI: Yes.

AMANPOUR: Is it time for you to try to go into a -- make another
government, a coalition government?

LIVNI: No, this is -- the current Israeli coalition is the prime
minister's -- Netanyahu's choice. He decided to build this coalition
with what he called his natural partners. My views about the peace
process and the need to achieve peace are -- are different from this
coalition.

I offered Netanyahu in the past -- more than once -- to have a
different coalition that can not only speak about the idea of two states
for two peoples, but also translate it into peace treaty with the
Palestinians. He decided to have this coalition, unfortunately.

Because part of my frustration today is that we are sitting
together, and two years ago, it was not -- excuse me, it was not news,
it was not big deal. I mean, we met, Israelis and Palestinians, on a
daily basis in the negotiations room, helping each other to solve
problems on the ground.

So I truly hope that there is a better understanding today in Israel
by the public and also leaders and politician that peace treaty is our
own interest. It's not a favor to the United States, and not even to
the Palestinians.

AMANPOUR: On that note -- I wish we had more time -- thank you
both, Prime Minister Fayyad...

FAYYAD: Thank you.

LIVNI: Thanks.

AMANPOUR: ... Tzipi Livni. Thank you so much for joining us.

And coming up next, the tax cut debate on our roundtable, with
George Will, Nobel Prize-winning economist Paul Krugman, Cokie Roberts,
and political strategist Matthew Dowd.

And later, an exclusive interview with former British Prime Minister
Gordon Brown. As one of the first political leaders to bail out banks,
he has a unique perspective on the current financial crisis.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: I've been keeping the first lady waiting for about half an
hour, so I'm going to take off. But...

B. CLINTON: I don't want to make her mad. Please go.

OBAMA: You're in good hands, and -- and Gibbs will call last question.

B. CLINTON: Well, I had quite a good time governing. I -- I am
happy to be here, I suppose, when the bullets that are fired are
unlikely to hit me, unless if they're just ricocheting.

There's never a perfect bipartisan bill in the eyes of a partisan.

I think the one thing that has -- always happens when you have
divided government is that people no longer see principled compromise as
weakness.

(END VIDEO CLIP)

AMANPOUR: President Obama hands over the podium to President Bill
Clinton at the White House briefing room on Friday.

Joining me now on our roundtable, George Will, Paul Krugman of the
New York Times, ABC's Cokie Roberts, and political strategist Matthew
Dowd.

Thank you all for being here. And we are going to talk about this
tax compromise. It's all going to go and be voted on, at least first
round (ph), in the Senate tomorrow.

Paul, you are not a fan. In fact, you wrote very, very stringently
against it, even though you admit he got more than you expected.

KRUGMAN: Yeah, I mean, this was a hostage deal. It was -- clearly,
the Republicans were holding middle-class tax cuts, unemployment
insurance hostage for getting those upper-end tax cuts. The president
negotiated a release of the hostages, but he did so in part by giving
more hostages. He set up another crisis.

We keep on talking about what happens two years from now, but it's
what happens one year from now, when the payroll tax extension and the
unemployment insurance extension run out that worry me. And now the
president is trying to sell that by saying, look, I got the release of
some hostages. Yeah, well, we know that. That wasn't the question.

AMANPOUR: But are you saying he should have just let them expire?

KRUGMAN: I think he had to be prepared to do that. I mean, this is
agonizing. I understand how tough it is. But this is -- basically, you
have a situation where you're bargaining with people who are prepared to
let the -- the -- the roof cave in. And if you make it clear from the
start, as he did, that he was not prepared to let it go, then, of
course, he's going to get a deal that's not very good, and there are
ways he could have negotiated more that would have been better.

AMANPOUR: Your partner here is calling you and your like
"delusional" and living in fantasy land.

ROBERTS: Well, it is a fantasy land, because the fact is that, you
know, 20 percent of the people in the last election identify themselves
as liberal, and it's the liberals who are screaming and yelling about
this. And the rest of the country is pretty happy.

And I think that, really, what we're look at here, though, is the
administration terrified about the economy. With the unemployment
numbers ticking back up, the fact is, is that they are -- this is a
stimulus plan. That's what this is. And it's, you know, trying to get
some money pumping into the economy so that the unemployment rate comes
down in time for the 2012 election.

KRUGMAN: Ah, but that's -- sorry, if I could just break in, if you
actually look at it, it's a one-year stimulus plan, so it's actually
going to help -- no question it'll bring the unemployment rate down by
the end of next year and then send it rising, at least relative to what
it otherwise have been, in 2012. So it's actually not even a good
political deal.

ROBERTS: Well, we'll see, won't we?

AMANPOUR: George, Paul and others are saying that the president got
snookered, but in that virally distributed column by Charles
Krauthammer, he's saying that the Republicans got snookered and the
president got a much better deal. Do you think that's true?

WILL: No one got snookered. They made a deal with the cards they
were dealt by an election, which changed the calculus here in town. The
New York Times described this tax deal as "odious." What adjective is
left for ethnic cleansing? I mean, this is a -- they split the
difference on this.

The president wanted on the estate tax, for example, which, by the
way, was bipartisan -- it was worked out with Jon Kyl, Republican of
Arizona, Blanche Lincoln, Democrat of Arkansas -- the president wanted a
45 percent rate on estates beginning at $3.5 million. The Republicans
-- most of them -- wanted zero, frankly. They don't think there should
be a death tax, but they settled for 35 percent on estates at $5
million. What is the big deal?

DOWD: Well, but to me -- to me, we -- we can debate -- and there's
going to be some question in my mind whether or not this can have any
effect on the economy. But what I think is unfortunate about this is we
have an election, and the country basically says, Barack Obama, you went
the wrong way, you didn't do bipartisanship, you didn't solve the
problems of this country, and then we have both political parties come
together in a bipartisan agreement, which doesn't deal with the
problems, really, that exist in the country, that doesn't ask for the
hard solutions, that doesn't call the American public to any sense of
leadership in this country and shared sense of sacrifice.

Basically, they come up with a bipartisan solution that gives
everything away and doesn't answer the hard questions.

ROBERTS: Well, but I think -- I think that is -- I think that is
the temporary answer. And it is because there's a deadline, which is,
of course, where you get things done, as you well know, a deadline of
tax cuts running out, but the -- but the fact is, is that that the
bigger, sort of harder piece of it...

(CROSSTALK)

DOWD: One sec, Paul. Wait a second. To me, it's a lot like
saying, "OK, I'm going to give you a bunch of cake, and I'm going to
give you a bunch of ice cream, but in six months, I'm going to ask you
to go on a diet. But right now, go ahead and eat your cake and eat your
ice cream."

KRUGMAN: The question is, what happened to -- what happened to the
deficit hawks?

(CROSSTALK)

KRUGMAN: Right? The week before this compromise, the -- all we
we're hearing was "deficit, deficit, deficit. We must suffer." And
then, all of a sudden, we get something that blows up the deficit by
$850 billion for starters, and probably much more than that, because it
is setting the stage for making a lot of this stuff permanent, and
everyone goes silent, and I think this is a teachable moment. This is
telling you that all of the deficit hawkery was entirely hypocritical.

ROBERTS: Hypocrisy is hardly new.

AMANPOUR: But, Paul, you've been calling for more stimulus...

KRUGMAN: That's right.

AMANPOUR: ... and not so much attention to the deficit and the debt.

KRUGMAN: Right. The trouble is, there is not a lot of -- there is
some real stimulus in here, but not much. The -- the unemployment
insurance extension, for sure. The payroll tax cut, maybe. The rest of
the stuff is not really stimulus.

And the cost -- I mean, if you think about cost and benefit, this is
a very low benefit per cost. This is a really bad deal compared with...

(CROSSTALK)

ROBERTS: The way you can get real stimulus is all the people who
think that the tax cut is going to people who are too rich should just
go out and spend some money. And then, you know, then we'll get some
stimulus going. We have an obligation to spend.

(CROSSTALK)

WILL: We're -- we're complaining -- we're complaining because a
lame-duck session, which is inherently illegitimate, is not solving
structural problems that have plagued the nation for a generation.

ROBERTS: That's right. That's right...

(CROSSTALK)

WILL: The simple fact is that this session up here is a gathering
of the exhausted, leavened (ph) by the repudiated. It shouldn't be
doing anything.

KRUGMAN: That's actually kind of -- we're agreed, right? I would
have been happier, actually -- I mean, I'm -- I'm agonized about this.
This is tough. I understand it's tough. But I actually think I would
have been happier if they had not done anything. I mean, it's just
because...

AMANPOUR: You would have been happier if they'd not done anything
and everybody would see their taxes rise?

KRUGMAN: Because then -- because we are setting ourselves up --
because I think -- I think part of -- I think part of the hard
bargaining on the part of the Republicans...

KRUGMAN: Well, let's -- you know, I think part of the Republicans'
stiffness on this is, in fact, a bluff. In fact, if the tax rates on
their favorite constituents went up, they would be screaming for a deal,
as well.

AMANPOUR: And what does this mean for bipartisanship? Look, you've
just talked about an election. The people really did say they want some
bipartisanship and they want solutions to these huge problems. Is this
one beautiful moment of bipartisan bubble?

DOWD: No.

AMANPOUR: Or does this presage the future?

DOWD: My belief is -- well, it's a bipartisan -- it's a bipartisan
moment that doesn't call the American public to any sense of leadership,
and that, to me, is not really a bipartisan moment. If you want a
bipartisan moment, you basically have to come together and make hard
choices. This was not a conversation that made hard choices.

(CROSSTALK)

AMANPOUR: But it was -- it was an attempt to make the president, as
his people describe him, to show his pragmatic side.

ROBERTS: Well, also, Mitch McConnell claims that the president
talked to him more in the last two weeks than in the last two years, and
-- and that is -- is much more of an instance of bipartisanship. Now,
the president should have done a little bit more groundwork with the
Democrats in the House, but -- you know, now Joe Biden is doing that.

DOWD: But -- but...

ROBERTS: But I think that what really happens in terms of
bipartisanship is that on every issue you put together a different
coalition, and that's just common sense.

AMANPOUR: Do you see this president doing what -- you brought in
President Bill Clinton -- doing the old triangulation, going towards the
center now?

WILL: I'm not sure he knows what the center looks like in this
country. In 2009, three days after his inauguration, he met with
Republicans in the White House, who wanted to have some influence on the
size and composition of the stimulus. His response to them was, "I
won." Well, he just heard from them, "We just won," and this is a
changed political landscape.

AMANPOUR: He did say elections have consequences, and he's
basically said that again, as -- as he's been pushing this through.

(CROSSTALK)

DOWD: But, Christiane -- but, Christiane, the thing about --
everybody keeps trying to compare this to Bill Clinton in 1994 and the
aftermath of the election. The huge difference between that is the
economy was growing, was doing well.

What he made -- Bill Clinton had made bad management decisions in
the two years that he had run up, a series of things, Travelgate, "don't
ask/don't tell," a bunch of things that he could then adjust and make
different decisions.

Barack Obama is in an economy that's only worsened since he's been
president of the United States. He can only solve his problems
management-wise if the economy improves. If the economy doesn't
improve, he can have a thousand meetings with Republicans...

(CROSSTALK)

AMANPOUR: ... presumably an attempt to make the economy improve and...

(CROSSTALK)

KRUGMAN: It's a very modest attempt. And, again, the timing thing
-- you really have to think that the timing thing is -- is critical.
Something that makes the economy improve for a while and then gives up
the gains, which is kind of what's in there...

ROBERTS: But, Paul, it doesn't mean this is the last act, you know.

KRUGMAN: Oh, it does, because he'll be...

(CROSSTALK)

ROBERTS: ... keep acting throughout the next year.

KRUGMAN: No, he'll be right over the barrel again...

AMANPOUR: You heard what -- what David Axelrod said, that, no, this
is temporary, it's not going to be permanent. Do you believe that?

KRUGMAN: No. I mean, it's...

AMANPOUR: Do you believe it?

ROBERTS: It depends.

KRUGMAN: I mean, they swore up and down they weren't going to do
what they did just now. I mean, it's...

ROBERTS: Congress -- you know, Congress works its will, which is
the way it's supposed to work, and -- and they'll decide, when we get to
-- the time comes.

KRUGMAN: And let me just say, all of this stuff -- I mean, I talk
to the, you know, guys who do number-crunching on elections, all of this
stuff about triangulating, moving to the center (inaudible) they say
none of it matters. What matters is the economy, and specifically what
matters is how fast the economy is growing in the six to nine months
before the election. That's really all that matters. I don't think...

(CROSSTALK)

AMANPOUR: So you're the economist. How fast do you think the
economy is going to grow?

KRUGMAN: I think it's going to do OK. It's going to do something
like 3.5 percent, 4 percent over the next year, which will bring
unemployment down some, and then it will stall.

AMANPOUR: Some? How much?

KRUGMAN: What? Oh, it brings us down by a half a point, one
point. We're still talking about insanely high unemployment, and it
will still be insanely high in 2012.

DOWD: And that's the reality check I think we have to have here, is
because in order for that to really improve, if -- if -- if Barack Obama
added 2 million jobs in the next 18 months, he loses re-election,
because basically the unemployment...

(CROSSTALK)

DOWD: ... rate has not adjusted. If he adds 2 million jobs in the
next 18 months, he has to add 3 million or 4 million or 5 million jobs
in the next 18 months...

(CROSSTALK)

KRUGMAN: ... 2 million jobs in 2012. That's the scary thing. What
the -- what the -- you know, what the regression analysis actually say
is, is the growth rate in the two quarters preceding the election that
matter.

WILL: The argument -- the reason there's so much vitriol
surrounding this is this comes at the end of a long list of liberal
disappointments. I made a little list of them: card check for unions,
not going to happen; climate change legislation, not going to happen;
the EPA says we'll do it by regulation, they're now backing off those;
Guantanamo Bay, still open; "don't ask/don't tell" not being repealed;
Afghan war escalated; Federal pay frozen, which goes right at sort of
the Republican theme that government is the problem.

AMANPOUR: START, maybe he -- maybe because of the negotiations with
Jon Kyl, he'll come around on START?

KRUGMAN: I don't think any voters care about that.

AMANPOUR: No, the voters might not.

(CROSSTALK)

KRUGMAN: No.

AMANPOUR: But the president has said that he wants it to happen...

(CROSSTALK)

ROBERTS: It might -- that might...

AMANPOUR: Will it happen?

ROBERTS: It might happen, but that's not going to appease the
liberals in the House.

AMANPOUR: No, I know.

ROBERTS: But that's what George is talking about. And it's not
just that their -- that their wish list is not fulfilled. It's that in
many of those cases, the House has gone out and voted and the Senate has
not, which has put them on a limb...

WILL: Precisely.

ROBERTS: ... which is why a lot of them walked (ph).

WILL: The big -- the big war in this town is not between
Republicans and Democrats.

ROBERTS: It's between the House and Senate.

WILL: It's between the Democratic House members and the Democratic
senators.

ROBERTS: Right.

AMANPOUR: So do you think -- I mean, tomorrow starts the first
round of votes on -- on this tax cut. Do you think that when it gets to
the House, that he will -- that the president will get more than just --
just the number of Democrats he needs to -- to put it over? Or will he
get many more than that?

DOWD: I think that he'll -- there will be some level of compromise,
I'm sure, in this package. He'll get a package...

AMANPOUR: Where? Because David Axelrod said no.

(CROSSTALK)

DOWD: They may -- they may have to give -- they may have to give up
on some of the estate tax cuts or something. There will be something...

AMANPOUR: He indicated no.

DOWD: But the interesting thing about this is, he will pass
something and will get no political benefit from this. The president of
the United States will get no political benefit from this until, at some
point, the American public has confidence and that jobs are being added
in this economy. He will not get a benefit from a...

(CROSSTALK)

KRUGMAN: Matt and I are in agreement on that.

ROBERTS: He would have gotten -- but he certainly would have gotten
-- he would have gotten a detriment if it had not happened.

KRUGMAN: I don't know about that.

ROBERTS: Oh, if taxes went up in January, everybody -- who's in the
White House?

KRUGMAN: I don't know that. I don't know that.

ROBERTS: Oh, I think there's only person (ph) at this point.

WILL: Might he have got some credit for this, if he hadn't come out
and...

(CROSSTALK)

WILL: He came out and said the hostage-takers made me do it. The
sanctimonious liberals...

DOWD: I agree with that.

(CROSSTALK)

WILL: ... and he just...

(CROSSTALK)

DOWD: His message -- his message wasn't helpful to get credit.

KRUGMAN: One thing about...

(CROSSTALK)

ROBERTS: ... anger was useful.

KRUGMAN: One thing about Obama and the base is he really is the
anti-dog whistler. I mean, it's amazing how -- you know, I think George
would think that he's given liberals a lot of what they wanted, in spite
of all those defeats, but he manages sort of the opposite of Bush. He
manages through what he says to convey the message, "I'm not really with
you. I don't really respect you." And it's -- and he did that. That
was the most self-indulgent press conference.

DOWD: The thing about the base in this (inaudible) for President
Bush and Ronald Reagan is, it doesn't matter if you're generally
popular. If you're generally popular, the base will be met. If you're
generally unpopular, then it matters.

ROBERTS: And, actually, that is also a Bill Clinton...

(CROSSTALK)

AMANPOUR: To be concluded in the green room. The roundtable will
continue in the green room at abcnews.com/thisweek, where you can also
find our fact checks in conjunction with PolitiFact.

AMANPOUR: We've been talking on this roundtable about tax cuts and
stimulating growth. In Britain, the government has launched drastic
spending cuts, austerity. And this week, people took to the streets in
protest that turned violent. Prince Charles and his wife, Camilla, on
their way to theater in their 20-foot-long Rolls-Royce limousine got
caught in the melee. It shocked the royals, raised questions about
security, and brought even more attention to Britain's austerity plan.

Joining me now to discuss the global economy, growth, unemployment
is the former British prime minister, Gordon Brown, also former
chancellor of the exchequer, what's known here as the treasury secretary.

Thank you for joining us.

BROWN: Good to be here.

AMANPOUR: And you have a new book, "Beyond the Crash," and it's
about trying to overcome this crisis that we've had. What does the
United States need to do to get this global economy in hand? And can it?

BROWN: The United States is the leading world power. It is the
source of the greatest innovation and technological advance the world
has ever seen. It still is. It's got miraculous skills in its
economy. The question is, can the world economy restore its high level
of growth without people working together?

A solution in America is not going to be enough because, one, you
can't have financial stability in one country without having it in
another, so you need a global approach to financial stability.

Secondly, you need a global approach to trade. America benefits
from the rapidly rising consumer markets in Asia, so America's got to
become, if you like, the architect of a new trade agreement.

And, thirdly, you don't get growth unless you cooperate across
nations now, and so America should put down the America plan for the
future, rather like the Marshall Plan in the 1940s, and say, "Look, this
is where we've got do -- what we've got to do."

China has got to consume more. Asia has got to consume more.
Europe's got to reform its markets. America is prepared to invest in
the future, while doing its fiscal consolidation. And that would mean,
in my view, that you would have this exit strategy from a crisis based
on high growth and high employment and not low growth and what I fear is
high unemployment for a decade.

AMANPOUR: What seems to be gripping, though, everybody, whether
here in the United States or in Europe, is the idea of debt, and so
everybody is talking about trying to -- trying to rebalance and pay off
the debt.

BROWN: I know, but you've got three problems. You have got a
fiscal deficit, which is inevitable, because you lost revenues during
the recession, but you've got massive bank liabilities, as well, which
is spilling over into being the fiscal problem, as well. But a lot of
banks are still not properly capitalized, and the financial system
globally is not in the best condition.

And the third thing is you haven't got is enough growth. So you
will always have high unemployment if you can't actually have the growth
that is necessary to keep people in jobs.

Now, I'm saying that America's future will lie not simply in serving
its own market here in America, but there's going to be a rapidly rising
billion-people-strong middle class developing in Asia wanting to buy the
brand goods we produce here in America, wanting to get the most
sophisticated products where the innovation is greatest in America, and
America should be looking outwards so that the exit strategy from this
crisis is actually benefiting from the Asian consumer revolution.

AMANPOUR: And you think it's not? You think it's looking inwards
right now?

BROWN: I think the danger at the moment is that people cut back in
education, which is vital for the future, that people cut back on their
international contacts, because they think the solutions lie in national
answers to their problems, when they lie in global cooperation.

And I think the danger is, you have a '30s-style protectionism where
people relapse into currency wars, as we're seeing, or trade wars or
banning takeovers that have got cross-border ramifications, or simply a
protectionism in of the mind, where anti-immigrant sentiment gets to the
point that we're not really talking to each other in a way that means
that we have a coordinated world.

AMANPOUR: The Federal Reserve did something and released some
evidence that something -- quite extraordinary, that British banks were
amongst those which were basically bailed out or partly by the Fed. Is
the Fed a global central bank? Should taxpayers here be doing that?

BROWN: I don't think that America uniquely was helping banks in
other parts of the world. We were in Britain. I mean, we had just...

AMANPOUR: But it did do for the USB, Barclays, RSB.

BROWN: Yeah, but -- but we did for banks that were operating in
Britain, as well. So -- so the Americans and Britons played a global
role, there's no doubt about it. But America and Britain were both
doing similar things. They were helping foreign banks that were based
in their own countries.

The question for the long run is, how can you have global financial
markets with only national regulators? How -- how can you solve the
problems where there are instabilities in the global flow of capital,
when all you have is a regulator sitting in Britain or America or
somewhere not knowing what's happening in the rest of the world?

So the real answer to this is to have proper global financial
supervision so that people have some certainty that there is not a race
to the bottom in financial standards, which is really what happened over
the last 10 years, a race to the bottom in financial standards. You
know, we have all these terms, CDSs, CDOs. It's really jargon for banks
that were betting and speculating with other people's money, and you
really have to have proper supervision.

AMANPOUR: Gordon Brown, thank you very much, indeed, for joining us.

BROWN: Thank you.

AMANPOUR: You can see more of my interview with the former prime
minister on abcnews.com.